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HMRC internal manual

Capital Gains Manual

Unit trusts: income units


Holders of income units in authorised unit trusts receive regular, often half-yearly, distributions of income together with a tax credit at the lower rate of tax. If a regular saving scheme is used to buy income units the income distribution may be automatically reinvested in new units. These units are normal acquisitions which belong to the contributor as soon as they are paid for. Unit trust managers supply unit holders with regular statements showing the amounts contributed, the income distribution reinvested, and the number of units purchased. Paragraph 15 of SP2/99 deals with the treatment of reinvested distributions if the taxpayer has taken advantage of the Statement of Practice.